Money laundering prevention (AML) is a dynamic policy field. Regulation, supervision, and law enforcement must continuously evaluate and develop measures responding to new risks. For obliged companies, this means regular adjustments to their prevention measures. The collected findings on strengths and weaknesses in turn flow into the political evaluation – from which consequences then arise for the powers and responsibilities of the respective authorities. The development of money laundering prevention is a cycle.
The upcoming federal election on 26 September 2021 will provide impulses for sustainable changes and setting the course for the coming years. Money laundering and the fight against it are “election campaign material” – at the latest after they have gained prominence through the debate about possible supervisory failures at Wirecard. In addition, the European Commission is currently working on a comprehensive reform of prevention requirements and supervisory structures. Germany’s “compliance review” by the OECD’s Financial Action Task Force (FATF) in November is also approaching.
This has provided enough reason for German parties to discuss money laundering prevention in the context of the Bundestag elections. However, the assessments of the “need for reform” differ greatly. Depending on the new government constellation, obligated companies must prepare themselves for the fact that even the question of the supervisory authority responsible for them will be considered anew after the Bundestag election. In contrast, it is already clear which individuals the parties will entrust with money laundering issues – which enables companies to share their core concerns in the political arena today, even before the start of possible coalition negotiations.
The debate in the election programmes revolves around three central questions:
Who will be responsible for combatting money laundering in the future?
Especially in the non-financial sector, supervisory structures are currently extremely “region-dependent”. In Lower Saxony and Rhineland-Palatinate, municipalities are responsible, while in Bavaria two governments divide the supervision between the administrative districts.
The CDU/CSU wants to stick to this ” supervision in situ” in its basic features – especially since local supervisory authorities are closer to the obligated parties. On the other hand, the SPD focuses exclusively on the financial sector and the Federal Financial Supervisory Authority (BaFin), which is responsible for this sector. The BaFin should be given “more competences in money laundering supervision, also for large companies, beyond its previous supervisory responsibilities”. This can also be read as a reaction to the Wirecard case. In addition, the SPD wants to “further strengthen the competences of customs authorities”.
In contrast, the Greens come to a much more negative analysis of the initial starting point. In their opinion, Germany is “currently a paradise for money laundering”. It needs “nationwide minimum standards for supervision, audits, resources and personnel”. In the fight against money laundering, responsibility should be “completely transferred to the federal government”. This would be a potentially controversial issue in coalition negotiations with the CDU/CSU.
However, the Greens’ election manifesto does not specify further on this point. It could be implemented, for example, by centralising the corresponding law enforcement competences at the Federal Criminal Police Office (BKA). In 2017, the Financial Intelligence Unit (FIU) was painstakingly “separated” from the BKA and transferred to the customs office. The parties also have different ideas on the future role of the FIU.
How will the Financial Intelligence Unit (FIU) be developed further?
After the FIU was transferred to the jurisdiction of the customs office, negative reports about file backlogs initially increased. While these problems have largely disappeared, the debate now revolves around the exact role of the FIU.
The Greens take a clear view. There needs to be an “active role” of supervisors and reporting offices instead of “just passing on suspicious activity reports”. One possible consequence of this would be investigative powers for the FIU, as suggested by experts like the Max Planck Institute.
In these efforts, the Greens would have an “unexpected ally”. The Bavarian Ministry of the Interior has initiated a debate in the Conference of Interior Ministers on whether the FIU should not be located at the BKA. This was the case before 2017. However, other CDU-led Länder have not yet taken a position on the proposal. A practical hurdle is the principle of legality that applies at the BKA: every suspicion of a criminal offence must be investigated, with no discretionary leeway for the law enforcement agency. In its current conception, on the other hand, the FIU is deliberately set up as an “administrative authority” to “correspond to the administrative nature of the reporting system under money laundering law” and avoid corresponding obligations. This was the answer given by the federal government to a parliamentary inquiry by the Greens during this legislative period. Therefore, before a possible change in competences, extensive discussions and examinations are to be expected.
What are the parties’ views on the ongoing reform at EU level?
Money laundering is a cross-border problem, and the fight against it must be as well. The European Commission is currently reviewing and revising parts of the Anti-Money Laundering Directive (AMLD), which is the basis of the German Money Laundering Act (GwG).
The CDU/CSU election manifesto singles out one central point from the European Commission’s considerations: the “EU authority for combatting money laundering and terrorist financing”, which may be newly created, should be located in Frankfurt am Main. The CDU/CSU will campaign for this in the EU.
The Greens, on the other hand, address another proposal of the European Commission. They want to examine the “introduction of a high ceiling for cash payments”. This opens potential for conflict in negotiations with the CDU. Their election manifesto states: “Cash is freedom in action”. The FDP shares this position. It wants to support the “unrestricted usability of cash as a means of payment”. In “Jamaica” negotiations (a coalition between the CDU, Greens, and FDP), the Greens would therefore have a lot of convincing to do.
Central actors in the coming legislative period are already emerging today
Who would lead the corresponding exploratory talks and coalition negotiations for the individual parties is already becoming apparent: In each of the parties, there are high-profile experts, most of whom will reapply for their Bundestag mandate.
This is particularly evident concerning the rapporteurs in the Bundestag Finance Committee. Sepp Müller (CDU) and Dr Jens Zimmermann (SPD) are both running again and have gained relatively promising places on the respective state lists of their parties. In the case of the opposition parties, the return of specialist politicians is even more likely: Lisa Paus (Greens) is running for first place on the list of the Berlin Greens, and Dr Florian Toncar (FDP) occupies the very promising fifth place on the list of the Baden-Württemberg FDP. Only the Left Party must reorganise its personnel, as it loses a high-profile financial policy head with the departure of Fabio de Masi.
Therefore, in coalition negotiations, “old acquaintances” will meet. For obligated companies this means that contact with the decisionmakers can already be sought or intensified now. Moreover, regardless of the outcome of the coalition negotiations, the first common challenge is already emerging. In November, Germany will be reviewed by the Financial Action Task Force (FATF). Germany’s implementation of the relevant international standards on money laundering prevention will be reviewed. It is in the common interest of politics and business to present a good picture here – before the results of the audit and the new European requirements herald the next cycle of adjustments to German money laundering regulation.